Debt and taxes in D.C.

It wasn’t exactly a Kumbaya moment, but top congressional Republicans offered Wednesday to meet the president halfway when it comes to solving the government’s fiscal woes. In fact, House Speaker John A. Boehner (R-Ohio) said he would support a tax code overhaul that raised more revenue — an apparent departure from the House GOP’s no-new-taxes orthodoxy. There’s an opportunity here for President Obama to finally obtain the “grand bargain” he’s been talking about for years, a deal that brings the federal deficit and debt under control by cutting spending, slowing the growth of entitlements and, yes, raising revenue.

It would be a mistake to read Boehner’s statements to the media as a concession, especially considering the barbed remark from Senate Minority Leader Mitch McConnell (R-Ky.) that “the voters have not endorsed the failures or excesses of the president’s first term.” Both men denied that Obama had a mandate from the voters to end the Bush-era tax cuts for the wealthy, which has been a central feature of Obama’s economic plan.

Those tax cuts cost about $700 billion over the course of a decade, which is too much at a time of trillion-dollar deficits. But there are other ways besides raising tax rates to collect more revenue while still preserving the progressivity of the tax code. One example is rolling back the exemptions, deductions and other preferences available to high-income taxpayers. Many economists argue that it’s better to go that route than to raise rates because tax preferences distort markets, while higher rates promote tax evasion and discourage work. And at least two bipartisan panels, including one created by Obama, have laid out blueprints for tax reforms that would raise significant revenue by reducing preferences while lowering rates.

One potentially insurmountable hurdle, though, is that seemingly every tax break has a powerful constituency. It would take great political will to roll back such things as the deduction for charitable donations and the preference for capital gains; they’re not only popular, they may also promote behavior that society values. Nevertheless, Obama should think creatively about how to raise revenue equitably without raising tax rates or stunting growth, rather than being wedded to a particular plan. And if the GOP proves unwilling to move out of its corner, the president should let the country know that Republicans were just bluffing about bipartisanship.